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The iPad 3 rumors are in full swing and many of them are focused on a new device possibly arriving as soon as the first quarter of 2012. But a new bit of information has just emerged that makes the next generation of iPads even more enticing, and it has to do with a smaller form factor.

Chinese tech site Digitimes has gone on record with a source that says Apple will introduce a new iPad size in 2012. According to the source, the new size will be 7.85 inches, a size specifically designed to compete head-to-head with the newly popular Kindle Fire from Amazon. The current generation of iPads are 9.5 inches tall, while the Kindle Fire measures just 7.5 inches, making it easier to tuck into a spare pocket or hold for extended periods of time while reading an e-book.

According to the report, the smaller iPads wouldn't arrive until later in the year. The report states, "In addition to purchasing 7.85-inch panels from LG Display, Apple will also buy panels from AU Optronics (AUO), indicated the sources, adding that makers in the supply chain are likely to begin production of the 7.85-inch models at the end of the second quarter of 2012."